MomentumOptions.com Pre-Market Update for 4/6/2023
Nasdaq Down Three-Straight
8:00am (EST)
The stock market pulled back on Wednesday as private payrolls revealed slowing job growth last month. Private companies added 145,000 jobs, versus forecasts for a print of 210,000, and signaling that employers are easing hiring plans.
Gold surged to nearly $2,050 an ounce intraday, before pulling back, while holding the $2,000 level for the second-straight session. Volatility was slightly up for the second-straight day but has been in an overall six-session trading range.
The Dow closed at 33,482 (+0.2%) after tagging an intraday peak of 33,543. Current and lower resistance at 33,500-33,750 was cleared but held. A move above the latter would imply upside towards 34,000-34,250. Support is at 33,250-33,000 and the 50-day moving average.
The S&P 500 bottomed out 4,072 before settling at 4,090 (-0.3%). Fresh and upper support at 4,100-4,050 failed to hold. A drop below the latter would suggest a retest to 4,025-3,975 and the 50-day moving average. Resistance remains at 4,150-4,200 with the February 2nd high at 4,195.
The Nasdaq finished at 11,996 (-1.1%) with the low at 11,931. New support at 12,050-11,900 failed to hold. A fade below the latter would indicate weakness to 11,800-11,650 and the 50-day moving average. Resistance is at 12,100-12,250 with the February 2nd high at 12,269.
Volatility Index
The Volatility Index (VIX) tapped a high of 20.08 with key resistance at 20 getting stretched but holding. A close above 20.50 and the 50-day moving average would signal additional strength towards 21.50-22. Key support from the start of the March remains at 18.50-18.
Thursday’s earnings announcements:
Before the open: Applied Blockchain (APLD), Constellation Brands (STZ), Lamb Weston Holdings (LW), Levi Strauss & Co. (LEVI), RPM International (RPM)
After the close: ClearSign Technologies (CLIR), GreenTree Hospitality Group (GHG), Vaalco Energy (EGY), WD-40 (WDFC)
Economic news:
Initial Jobless Claims – 8:30am
Market Thoughts
The market has been mixed throughout the shortened week as Wall Street seems to be looking ahead to first-quarter earnings season. Mini trading ranges could be developing into next week with the earnings fireworks starting mid-month.
Of course, this will assume near-term support levels hold into today’s closing bell with the market closed on Good Friday. Coming into the week, we listed key support levels at: Dow 32,500; S&P 4,000; and Nasdaq 11,800.
We said if they were cracked and failed to hold, it would signal a false breakout across the board from last week. We also stated it would reengage the prior nine and 10-day trading ranges for the major indexes.
The RSI (relative strength index) levels have pulled back to 60 and below with only the Nasdaq giving a slightly bearish reading. There was a chance 70 was going to come into focus if there was continued momentum to start the week so this week’s consolidation could actually work in the bulls favor if Wall Street rewards 1Q earnings. Remember, 70-75 readings typically indicate overbought levels.
As far as volatility, 18.50 has been a magnet this week with Tuesday’s and Monday’s intraday lows at 18.58 and 18.54, respectively. Last Friday’s low kissed 18.52 on the VIX and we highlighted the March 7th and 6th intraday lows at 18.51 and 18.49, on Monday morning with the March 3rd low at 18.16.
Tuesday’s and Wednesday’s intraday peaks hit 20.03 and 20.08, respectively, on the VIX. We stated a close above 20.50 would signal some caution going forward. In a nutshell, a close above 20.50 would be bearish for the market over the near-term while a move below 18 would be bullish.
There is some risk on Friday even though the market will be closed as the jobs report could have a major impact on Monday’s open. Despite this week’s consolidation, we managed to add a New Trade yesterday/ Monday so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 9-3 (75%). All trades are dated and time stamped for verification. New subscribers can look at the past history to see how the trades have played out or to research our Track Records. Do not risk more than 5% of your trading account on any one trade but do try to take all of the trades.
Please remember, all “Exit Targets” and “Stop Targets” are targets. You should not have any “Stops” entered to close any trades or “Limit Orders” in your brokerage account unless I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the Otherwise, follow instructions at all times in the updates on Monday’s and Thursday’s along with the Text Alerts throughout the week.
Verizon Communications (VZ, $40.11, up $0.46)
VZ May 40 calls (VZ230505C00040000, $0.85, up $0.25)
Entry Price: $0.65 (4/5/2023)
Exit Target: $1.30
Return: 31%
Stop Target: 70 cents (Stop Limit)
Action: Set a Stop Limit at 70 cents. We typically don’t enter Stop Limits right after a recommendation but if the technical setup below unfolds, it will protect a slight profit and avoid a possible loss.
Shares rallied to a high of $40.24 into the closing bell with lower resistance at $40-$40.25 getting cleared and holding. A close above the latter and the 200-day moving average would be an ongoing bullish development for strength to $40.75-$41 and levels from early February. Rising support is at $39.75-$39.50.
Shares could be getting slightly overbought as RSI is pushing 70. However, the January peak was just below 80 with shares stalling at $42. If shares cleared $41.30, technically, by May 5th, these options will double from the entry price. At $42, we are looking at a 200% return.
The Stop Limit will trip if the 200-day moving average holds and shares fade back below $40 and do a retest to $39 and the 50-day moving average.
Transocean (RIG, $6.43, down $0.19)
RIG April 8 calls (RIG230421C00008000, $0.05, down $0.04)
Entry Price: $0.45 (3/3/2023)
Exit Target: $0.90
Return: -89%
Stop Target: None
Action: Close the trade this morning to save the remaining premium.
We were teased as shares cleared and held $7 on Monday and one of our goals coming into the week. However, we also said $7.50 would be more imperative to clear and hold. With multiple layers of resistance ahead, it best to cut losses and move on.